Can You Buy a Hotel Room Permanently?

While not like buying a traditional home, several real estate models allow individuals to acquire ownership or long-term occupancy within a hotel setting. These options offer varying degrees of ownership, usage rights, and financial obligations. Understanding these models clarifies how one can establish a lasting presence in a hotel environment.

Understanding Condo-Hotels

Condo-hotels represent a direct form of “buying a hotel room permanently” as a real estate asset, where individual units are owned with a fee-simple interest, similar to a condominium deed. These units are typically part of a larger hotel complex, providing amenities like a front desk, housekeeping, and concierge services. Owners can use their unit for personal enjoyment or place it into the hotel’s rental program.

While individual units are owned, the property operates as a hotel. Owners can rent out their unit when not in use, with the hotel management company handling rentals. This arrangement generates rental income, helping offset expenses. Revenue splits vary, but owners commonly receive 40-60% of rental revenue after management fees.

Financial aspects include regular common charges or Homeowners Association (HOA) fees, which are typically higher than for traditional condominiums ($0.50-$2.00 per square foot monthly). These cover common area maintenance, utilities, insurance, and hotel services. Owners are also responsible for property taxes. Special assessments may be levied for unexpected costs or reserve shortfalls.

If used for rental purposes, income from a condo-hotel unit is taxable and reported on IRS Schedule E. Owners can deduct expenses like HOA fees, property taxes, management fees, and depreciation. Residential rental properties can be depreciated over 27.5 years using the General Depreciation System (GDS).

Financing a condo-hotel unit is more complex than for traditional residential property. Lenders view them as higher-risk investments, leading to stricter eligibility. A minimum down payment of 20-30% is common, though more may be required. Specialized lenders offer “non-warrantable” loans, as these do not meet criteria for traditional mortgage backers like Fannie Mae or Freddie Mac.

Timeshares and Fractional Ownership

Timeshares and fractional ownership offer structured ways to access vacation properties. A timeshare involves purchasing the right to use a property for a specific period each year, such as a week. This arrangement can be structured as shared deeded ownership, where the buyer receives a deed for a percentage of the unit corresponding to their usage time. Alternatively, it can be shared leased ownership (also known as “right-to-use”), where the developer retains the deed and the owner acquires a lease interest for a set term.

Timeshare owners pay an initial purchase price and recurring annual maintenance fees for upkeep and administration. These fees, typically $800-$1,500 annually, often increase by 2-5% per year. Special assessments may also be levied. For tax purposes, timeshares are personal assets; losses on sale and personal use maintenance fees are usually not deductible. However, if the timeshare loan is secured by the property and meets the IRS definition of a “second home,” the interest may be tax-deductible.

Fractional ownership involves shared deeded ownership, granting more substantial usage rights than a typical timeshare. Co-owners hold a part of the asset and share benefits and responsibilities. This typically involves a smaller group sharing a higher-value property, with each owner receiving a deeded percentage. Owners pay proportional property taxes and annual maintenance fees.

Unlike timeshares, fractional ownership provides a direct real estate interest, allowing for appreciation and potential rental income when not in personal use. If rented, co-owners report their share of income and deduct expenses like maintenance, property management, and taxes. Tax treatment can be complex, especially regarding personal use limitations and depreciation. Fractional ownership offers a shared real estate asset with financial and tax implications, beyond just vacation usage rights.

Extended Stay and Residential Hotel Units

Extended stay hotels offer lodging for longer durations, typically weeks or months, through rental agreements. They provide apartment-like amenities such as kitchenettes and laundry facilities. Guests pay monthly rates, avoiding property taxes, HOA fees, or other ownership costs.

Residential hotel units are distinct from extended stay options and condo-hotels. These are apartments or condominiums within a hotel complex, sold as traditional residential real estate with fee-simple ownership. Owners can use their unit as a primary residence or second home, without mandatory participation in a hotel rental program. Access to hotel amenities and services is often optional or comes with additional fees.

Financial and tax implications for residential hotel units mirror conventional residential property ownership. Owners pay property taxes and potentially higher HOA fees due to hotel services access. Unlike condo-hotels, these units are not primarily for short-term rental by the hotel operator; any rental activity is a private landlord arrangement. The core transaction is a residential real estate purchase for long-term residency or personal use, not an investment focused on hotel rental income.